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Economist won Nobel prize

Free market advocate ... James Buchanan believed the state was best analysed as a monopoly. Photo: AP

James Buchanan, the 1986 Nobel laureate in economics, sought to retell the constitutional wisdom of the US's founding fathers to their 20th century descendants.

Contrary to the commonly held view that democracy was the articulation of a ''general will'' by majoritarian institutions, Buchanan argued democracy was a competitive political market. In his classic co-authored work of 1962, The Calculus of Consent: Logical Foundations of Constitutional Democracy, he argued that a political system consisting of a single chamber making decisions by 50 per cent plus one could not amount to a process of political exchange.

Buchanan had the greatness that allowed him to fruitfully cultivate his contradictions - the wish to debunk political romance with an attraction to that of his own, a readiness to deploy scientific method while maintaining a philosophic texture of mind and to be both alienated from his country and to love it.

James McGill Buchanan was born on October 3, 1919, in rural Tennessee, eldest son of James Buchanan and his wife, Lila (nee Scott). His paternal grandfather had been a Democratic governor of Tennessee but, by the time James was born, the family was living in ''genteel poverty''.

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James was expected to re-win the lustre of the family name but, after graduating from Middle Tennessee State Teachers College and the University of Tennessee, he was drafted into the US Naval Reserve officers training program, where he experienced the ''blatant discrimination against southerners, westerners and midwesterners'' that radicalised him against the ''eastern establishment''. He graduated sixth out of 600.

Buchanan was allocated to the staff of Admiral Nimitz and there acquired a loathing of the grandstanding of General MacArthur. In July 1945, he received an instruction to arrange for the USS Minneapolis to pick up ''a special cargo''. Puzzled by this unusual order, he made out the dispatch nonetheless. Earlier, while on leave in his home state, he had heard rumours of the Oak Ridge plutonium plant but only after the Hiroshima bombing did he realise how he had been one tiny cog in the mechanism of nuclear destruction.

After demobilisation and marrying Anne Bakke in 1945, Buchanan enrolled in economics at the University of Chicago. He saw himself as a liberal socialist but within weeks was a free market advocate. His world view was completed by his study leave in Italy in 1955, which acquainted him with the pathologies of the Italian state and pitiless realism of Italian thinkers towards it. The upshot was an outlook on the relationship between government and the economy that was at odds with that of most mid-20th century economists.

Whereas they were trustful of government custody of economic management but wary of democratic pressures on it, Buchanan reversed that position - he was distrustful of government and hopeful of democracy. Whereas the standard view saw government as benevolent and competent, in Buchanan's ''public choice'' position, government is no more benevolent than any business. Worse, it was typically a sole provider and so was best analysed as a monopoly.

Buchanan's confidence in the US political system faltered in the tumult of 1960s, which included the bombing of the office of his head of department at the University of California, Los Angeles. He saw the spread of ''constitutional chaos'' underwritten by an unholy alliance of Democrats and Republicans to repeal the ''unwritten'' prohibition of budget deficits. The fall of the Berlin Wall in 1991 brought him little sense of triumph; socialism is dead, he said, but ''leviathan lives on''.

Of the economics of the last generation, he said he was reminded of Tolkien, ''who through sheer power of imagination created a whole new world of beings, the hobbit world, in his trilogy, The Lord of the Rings. The analogy is revealing when we recall that Tolkien was writing fairy tales for children.''

Buchanan is survived by sisters Lila and Elizabeth and three nephews. Anne died in 2005.